Among the concerns that are at the top of the mind of financial advisors when investing overseas is geopolitical uncertainty. However, that concern is not enough to dissuade them from continuing to invest in international assets in 2018. This was revealed in a survey that was conducted by Northern Trust’s FlexShares Exchange Traded Funds (ETFs).
In 2018, half of the over 250 advisors participating in the survey at the IMPACT 2017 conference were ready to enhance their investment in foreign markets. The survey was done in late November. Of all the respondents in the survey, decreasing of international investments and exposure was in the mind of only 4 percent. There were 44 percent who did not wish to make any change in their international exposure.
There would however be a certain degree of unease among advisors with respect to overseas investment despite enhanced appetite. Geopolitics was cited to be their top concern when investing internationally by almost two-thirds (64 percent) of the respondents. Costs (39 percent), liquidity (25 percent), and regulations (21 percent) were cited as top concerns among other issues.
“Concerns about investing internationally do not appear to limit advisor interest in capitalizing on opportunities abroad,” said Darek Wojnar, Head of Funds and Managed Accounts Group. “With international growth expected by many to continue, advisors are adjusting their asset allocation models to account for this. In particular, they’re primarily turning towards international-focused funds to gain this exposure.”
With respect to the tools of investment in international markets, 70 per cent of the financial advisors chose mutual funds while ETFs would be the first choice of 58 per cent and about 38 per cent of the respondents would be using both the tools. And in comparison, only about 20 per cent of the respondents plans to use individual securities for gaining international exposure.
“U.S. investors have been underweight international equities in recent years, as compared to the historical mean, particularly immediately following the U.S. presidential election” said Chris Huemmer, senior investment strategist at FlexShares. “However, we’re seeing a transition in investor expectations, as they realize the U.S. is not the sole engine of global growth. A combination of factors – including strong performance of emerging markets, positive global growth predictions, compelling valuations of international equities, and more accommodative monetary policy overseas – make international exposure an attractive allocation heading into 2018.”
(Adapted from Businesswire.com)